Rogers Communications posts lower Q2 net earnings on flat revenues
Posted Jul 24, 2014 07:50:13 AM.
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TORONTO – Rogers Communications Inc. (TSX:RCI.B) has reported a lower second-quarter net income but beat analyst expectations as it focuses on improving its operations.
The telecommunications company posted earnings of $405 million on flat year-over-year revenue of $3.2 billion, but showed signs of strength in its wireless operations.
“It’s obviously still very early days, but there’s tremendous amount of work going on behind the scenes, setting the stage and we’re making progress putting in place a new team and structure as well as cascading that structure and accountability down the whole organization,” chief executive Guy Laurence said in a conference call with analysts Thursday.
“I’m confident that you will see us moving in the right direction over the coming quarters.”
Toronto-based Rogers said its net additions of post-paid customers, those generally on smartphone contracts, was 38,000, down 60 per cent from 98,000 in the same quarter last year.
Net profit amounted to 76 cents per diluted share, down 24 per cent from $532 million, or 93 cents, in the same quarter of 2013, while adjusted net income, excluding items, was $432 million, or 84 cents for the three months ended June 30, versus $497 million, or 96 cents, in the same quarter last year.
“Overall Q2 results were better than we had expected, mainly driven by outperformance in wireless,” Barclays Capital Inc. analyst Phillip Huang said in a note to clients.
“However, adjusted consolidated EBITDA continues to trend well below guidance at 49 per cent of the low end of their guidance range, although management has not made any changes to their guidance. We wonder whether this could mean a stronger second half,” despite weak Internet subscriber growth and continued under performance by the cable segment, he said.
Rogers said that excluding the decline in roaming revenue due to the new cellphone roaming plans introduced during the past year, wireless network revenue would have been two per cent higher than in the second quarter of 2013. Cable revenue was consistent with last year as continued Internet revenue growth and the pricing changes across all product types was mostly offset by television subscriber losses.
RBC analyst Drew McReynolds said the better than expected postpaid average revenue per user (APRPU) “suggests worst is over” for the wireless segment, saying the improvement is partly attributable to “an easing of promotions, the flow-through of higher-priced two-year plans and now postpaid ARPU that is reaching or has reached parity with Bell and Telus.”
Analysts had expected adjusted net income of $448.4 million on earnings per share of 84 cents, according to data compiled by Thomson Reuters.
The company confirmed this week it had eliminated several hundred middle management positions as part of its Rogers 3.0 corporate revitalization plan, a move that analysts said was needed after a period of stagnation.
Rogers has been losing market share to long-time rivals BCE Bell (TSX:BCE) and Telus (TSX:T) despite having Canada’s largest base of mobile phone subscribers, and there’s concern that Quebecor’s Videotron (TSX:QBR.B) could add to the pressure if it decides to expand its wireless business beyond Quebec.
It also suffered a blow when Bell and Telus rolled out faster mobile networks and new television services.
BCE Inc. offered Wednesday to consolidate its position in Atlantic Canada by taking full ownership of Bell Aliant in a$ 3.95-billion deal, a plan Laurence called interesting but not unexpected.
“We’ve seen that Aliant is probably more nimble than its mothership and I would hope that now it’s combined with its mothership it will become less nimble as the impact of bureaucracy starts to drag on the management team out there,” he said.
Laurence declined to discuss the potential of any partnerships with Quebecor should it expand outside its home province, saying if the company was serious and wanted to talk to Rogers, “they know where we are.”
“I have no idea how the conversation would end up, but we haven’t had the conversation.”
Chief financial officer Tony Staffieri also said Rogers was “very comfortable” with its network performance and spectrum position nationally, and wasn’t looking for a partner.
“To the extent that there are compelling dynamics related to it, as Guy said, we’d look at it, but we’re comfortable with our position right now,” Staffieri said.
